4) Risk Monitoring and Control: The Bank regularly monitors, controls and mitigates risks by setting key risk indicators, risk limits, as well as risk appetite at bank-wide, portfolio, product and other levels as deemed appropriate. 5) Risk Reporting & Communication: The Bank regularly reports the status of various risk types covering both financial risk and non-financial risk as well as actions taken/to be taken are reported to relevant parties/committees and top management on a regular basis. The risk reports cover product level, portfolio level, functional level, and the bank-wide level. Three lines of Defense: Over the last years, the Bank has invested significantly in strengthening its risk management culture by establishing three lines of defense. In this structure the employees in the Business Units (the 1st line of defense) identify risks, consider the impact, report if necessary and apply appropriate risk mitigation strategies. Investments include training, tooling, processes and policies. Risk Management units under the Chief Risk Officer perform the 2nd line of defense duties of formulating risk strategy and appetite, policies, guidelines, standards and appropriate risk structures, provide oversight and monitor the 1st line of defense and actively challenge the risk–return trade-off in the Business units. Internal audit as the 3rd line of defense provides independent and objective assurance on the effectiveness of controls and recommends improvements to the governance, risk & control framework. 2.2 Key Risk Factors Key risk factors that could arise from the Bank’s business operation are as follows: 2.2.1 Credit Risk Credit risk is the risk of potential loss as a result of borrowers and/or counterparties failing to meet their financial and contractual obligations in accordance with agreed terms. It arises primarily from granting loans and undertaking contingent liabilities, and also from certain off-balance sheet products such as credit derivatives. The Bank’s credit risk management objective is to optimize the Bank’s risk-adjusted return by balancing the risk/return and by building a sustainable competitive advantage by integrating risk management into business activities and strategic planning. In recent years, the Bank has improved and continues to improve its credit risk management capabilities with investments in people, risk management governance, processes, measurement tools and systems including the development of an economic capital framework, improved risk measurement processes, credit assessment and origination as well as various tools, such as risk rating models, application, behavioral and collection scorecards., The Bank also established frameworks which set out credit policies, procedures, and guidelines 101 Form 56-1 One Report 2021
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